On February 21, 2023, the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) issued the latest in a series of opinions involving the Trump Administration’s rule interpreting Section 401 of the Clean Water Act (CWA). Section 401 requires any project needing a federal permit that may result in a discharge of pollutants into state waters to obtain a water quality certification from the affected state or tribe. The effect of the Ninth Circuit’s decision is to reinstate, at least temporarily, a rule issued by the Environmental Protection Agency (EPA) during the Trump Administration that significantly scaled back state powers under Section 401. The impact of the Ninth Circuit’s decision is likely to be short-lived, as EPA is on track to issue a new rule interpreting Section 401 that will largely restore state and tribal powers.

Key Takeaways

• The Ninth Circuit ruled that the District Court overstepped its authority when, at EPA’s request, it remanded the Trump-era rule but also vacated that rule without determining that it was unlawfully adopted.

• The result of the decision is to reinstate the Trump-era rule, at least on an interim basis.

• EPA plans to issue a new rule interpreting CWA Section 401 in the near future. Hence, as a practical matter, the Ninth Circuit’s decision will impact only state and tribal actions under Section 401 before the new rule takes effect.

Background

As we previously discussed in greater detail, CWA Section 401 requires the sponsor of any project requiring a federal permit that will result in a discharge of pollutants into the waters of a state to obtain a water quality certificate from the affected states or tribes. States are permitted to either issue or deny a water quality certification and, if they issue a certification, to include conditions on that certification. Section 401 provides up to one year from the date a certification is requested for the state or tribe to act, and if no action is taken, the state’s authority is waived.

Application of Section 401, especially the one-year limitation, has proven controversial, producing a difficult and contradictory body of law from the federal appeals courts. In June 2020, the EPA adopted a rule governing certifications under Section 401 that strictly interpreted Section 401’s one-year clock and restricted the states’ substantive powers under Section 401. Several states, tribes, and environmental groups challenged the rule in the U.S. District Court for the Northern District of California.

As that litigation was getting underway, President Biden was elected, and the Trump-era Section 401 rule was among a list of Trump actions the new Administration directed EPA to revisit on its first day in office. On June 2, 2021, EPA issued a Notice of Intent to replace the Trump-era rule with a new one. Therefore, EPA requested a voluntary remand of the 2020 rule to reconsider and revise it. The District Court agreed to remand the rule but also vacated it. The District Court’s decision to vacate the rule was appealed to the Ninth Circuit, and in an unusual move, the U.S. Supreme Court issued a temporary stay of the District Court’s decision to vacate the 2020 rule during the pendency of the Ninth Circuit appeal.

The Ninth Circuit’s decision reaches an important question of administrative law, whether District Courts have the power to vacate administrative rules when an agency requests a voluntary remand of a rule for further consideration. The Ninth Circuit concludes that, under the Administrative Procedures Act, courts can vacate an agency action only if they first determine the agency action is unlawful. Accordingly, the court concludes, the District Court overstepped its authority by vacating the EPA’s 2020 rule without first concluding that EPA had acted unlawfully.

The decision effectively reinstates the Trump-era EPA’s rule governing state and tribal certifications under Section 401. However, that rule is likely to be replaced soon. EPA completed the public comment period on its 2021 proposal to replace the Trump-era rule in August 2022 and indicates that it expects to issue its new final rule this spring.

Conclusion

CWA Section 401 is a key permitting requirement for any project requiring a federal permit that could impact water quality. Section 401 certifications are required for, for example, pipelines, hydroelectric projects, and other energy infrastructure requiring a FERC permit and for various construction activities requiring a dredge-and-fill or NPDES permit under the CWA. Sponsors of such projects should pay careful attention to the restrictions currently in place on state action under Section 401 and how state powers will change under the new rule EPA is likely to issue soon.